2025 emerged as one of the most consequential years from a capital markets perspective, characterized by profound contrasts and transformation in global politics, trade, and economics. The year delivered a series of defining moments that reshaped how nations conduct business and manage relationships, leaving a lasting imprint on global markets through decisive policy actions and unprecedented economic shifts.

Trump's Tariff-Driven Global Agenda

President Trump commenced his second term in January with swift action, signing 26 executive orders on his first day while making his presence felt at the World Economic Forum in Davos. The administration escalated its protectionist stance through "Liberation Day" policies announced on April 2, which altered the global economic path by raising tariffs on steel and aluminum imports while introducing a reciprocal tariff regime.

The tariff measures included a 26% ad valorem tariff on Indian imports, later escalating to 50% by August, making India the highest-tariffed nation for the US. These policies dismantled 25 years of India-US engagement and established tariffs as the dominant global headline throughout the year, significantly heightening trade tensions and disrupting global supply chains.

India's Strategic Economic Response

India responded with comprehensive domestic reforms throughout 2025. February's Union Budget delivered substantial middle-class relief by raising the personal income tax exemption threshold to ₹12 lakh, shifting focus toward consumption from capital expenditure under the Atmanirbhar Bharat framework.

September marked the most significant GST overhaul since 2017, with cuts taking effect from September 22. The reforms focused on simplifying the indirect tax structure through rate rationalization, reduced tax slabs, and streamlined processes, particularly benefiting MSMEs and triggering a consumption pickup that contributed to better-than-expected earnings commentary for the second half.

Volatile Investment Patterns and Economic Resilience

Foreign institutional investors experienced a rollercoaster year in Indian equity markets. April witnessed temporary turnaround with net FII inflows of ₹4,223 crore following first-quarter outflows, supported by stabilizing global markets and attractive Indian equity valuations.

Despite volatile foreign investment flows, India demonstrated remarkable economic resilience. GDP growth accelerated to 8.20% for the second quarter, marking the fastest pace in six quarters and well above market expectations. Retail inflation fell sharply to 0.25% year-on-year in October, the lowest level since 2012, providing significant consumer relief.

Cultural Milestones and Global Contrasts

The year showcased remarkable contrasts across sectors. While DeepSeek opened the year as a major headline-maker with advances by a Chinese technology firm, entertainment delivered defining moments. The Indian women's cricket team won the World Cup in November, uniting the country in celebration following previous victories including D Gukesh's World Chess Championship title.

The entertainment sector closed with contrasts as the Gujarati devotional film "Laalo" earned more than ₹100 crore on a production cost of ₹50 lakh, even as much of Indian cinema struggled. Comedian Zakir Khan became the first Indian to stage a Hindi comedy show at Madison Square Garden, marking a personal milestone.

Monetary Policy and Strategic Outlook

December concluded positively with RBI's Monetary Policy Committee cutting the policy repo rate by 25 basis points to 5.25%, marking the fourth rate cut of 2025. The decision reflected neutral policy stance amid easing inflation and resilient economic activity, with the central bank's actions in June drawing particular attention and lifting sentiment.

2025 was defined by significant contrasts and transformative developments that reshaped market dynamics. While Trump's tariff policies and foreign investment volatility influenced global tensions, India's strategic reforms, strong GDP growth, low inflation, and cultural achievements demonstrated remarkable resilience, positioning the nation well for navigating future uncertainties with hopes for greater policy clarity and steadier conditions ahead.

Recent reports highlighting ongoing trade negotiations between India and the United States indicate that India has not provided market access to US agricultural products under the Bilateral Trade Agreement (BTA).

Current Trade Agreement Status

The absence of agricultural market access provisions in the BTA reflects the complex nature of India-US trade relations. Agricultural trade has historically been a sensitive area in bilateral negotiations, with both countries maintaining specific policies to protect their domestic farming sectors.

Implications for Bilateral Relations

This development may influence future trade discussions between India and the United States. Agricultural products represent a substantial portion of US exports, and market access to India's large consumer base has been a key negotiating point in previous trade talks.

Trade Agreement Framework

The BTA framework typically encompasses various sectors and trade facilitation measures. However, the exclusion of US agricultural market access suggests that this particular sector may require separate negotiations or additional agreements to address the concerns of both nations.

The current status indicates that both countries may need to engage in further discussions to resolve agricultural trade issues and potentially expand the scope of their bilateral trade relationship.